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As President Bush grapples with an unpopular war in Iraq, he is turning his attention back to key pocketbook issues including health care and energy. Republicans, already looking ahead to next year's crucial elections, can only hope the administration's new domestic agenda pushes Iraq off the front page.

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To be sure, Bush devoted an ample portion of his annual State of the Union address to the threat of terrorism and he war in Iraq. But much of the address is focused on domestic issues that have more daily impact on voters' lives.

“They’re getting tremendous heat at the White House from Republicans who are very worried about '08,” said Greg Valliere, chief strategist at Stanford Washington Research. “Their feeling is, if it’s nothing but Iraq between now and '08, they’re going to suffer even more losses in the next election — including quite possibly the White House.”

Among the key proposals was a call to slash U.S. gasoline consumption by up to 20 percent by 2017, in part by focusing on a range of alternative fuels. To meet that target, the administration is proposing to increase the amount of renewable and alternative fuels required by 2017 to 35 billions gallons a year, a fivefold increase in the current target, providing 15 percent of the 20 percent savings goal. The rest could come from raising the mandated auto fuel efficiency standards.

That marks a dramatic shift for a White House that has spent most of the past six years working with a Republican-led Congress to develop greater supplies of oil and natural gas. Early in the administration Vice President Dick Cheney famously described conservation as a “personal virtue” that had no place in national energy policy.

But the atmosphere is distinctly different now that Democrats control both houses of Congress and
even Big Business recognizes
that global warming is an issue that needs to be addressed. The White House also called for stopping the growth of carbon emissions within 10 years, but provided few details on how that goal could be achieved.

"For too long our nation has been dependent on foreign oil," Bush said in his prepared remarks. "And this dependence leaves us more vulnerable to hostile regimes, and to terrorists — who could cause huge disruptions of oil shipments, raise the price of oil and do great harm to our economy."

Bush also pressed for increasing oil supplies by stepping up domestic production and doubling the size of the Strategic Petroleum Reserve.

Skeptics argue that the talk about alternatives has a familiar ring to it and that the White House has never backed up its bold proposals with the budget requests needed to follow through.

"There’s a tendency to stand up on energy policy in the State of the Union and make all sorts of grandiose promises,” said Philip Clapp, president of the National Environmental Trust. “And then once the bill's passed and the crisis passes and we're below $3 (a gallon) then they never get funded.”

The White House's revised energy plan would include steps to raise the fuel efficiency of American cars. But the devil is in the details. Bush is said to be leaning toward a plan to mandate minimum fuel efficiency for individual car models. Some critics say that could be a step in the wrong direction — if it doesn’t also require fleet-wide increases in efficiency.

"It’s a bad idea because it allows any administration to hide what they’re really doing in overall fleet economy,” said Clapp.

At the center of the proposal is a call for big increases in the use of ethanol — whose producers, and the corn growers who supply them, already have been big beneficiaries of the White House energy policy and can expect more support in the future.

Subsidies for ethanol enjoy wide support in Congress — especially as the 2008 campaign begins to get under way in the farm belt. Ethanol subsidies also offer an important offset to possible cuts in other farm subsidies — which have become a major sticking point in the latest round of global trade talks.

“Ethanol has become the way to replace what both parties might want to cut from commodity price subsidies and keep a large money flow into the agricultural states,” said Clapp.

In his speech, Bush also proposed expansion of so-called “cellulosic” ethanol — which is uses a wider variety of source crops. Though supplies of corn-based ethanol are expanding rapidly, rising demand has forced up the prices. Growing ethanol production also has driven corn prices to their highest levels in a decade.

Bush this week laid out the broad details of a proposal to expand health care insurance to the estimated 47 million Americans who have no coverage. Under the plan, the government would provide tax deductions of $7,500 — and $15,000 for families — regardless of whether they get coverage at work or pay for it on their own.

Under the president's plan, employer-provided health insurance policies worth more than those deduction limits would be taxed. The proposal also would take away some federal money now going to support hospitals and other public health facilities and use it to help cover those who have no insurance.

"In all we do, we must remember that the best health care decisions are made not by government and insurance companies, but by patients and their doctors," Bush said in his speech.

Backers of the plan say it’s only fair to subject all health coverage to the same tax rules.

“This is an opportunity to rearrange and better distribute our tax subsidies at the federal level so that those who haven’t been able to access the health care system — or are penalized for purchasing less expensive health insurance — are able to gain from that,” said Thomas Miller, a fellow at the American Enterprise Institute

But critics say the plan doesn’t go far enough in directly providing health coverage directly for those who don’t have it.

“It will provide a tax break that's worth more to the wealthy, who are most likely to have coverage, and provide little if any benefits to other Americans,” said Jean Ross, executive director of the California Budget Project, a non-profit research group.

The White House is also hoping to head off other health care reform proposals that are beginning to gather momentum at the state level. The latest plan, proposed earlier this month by California Gov. Arnold Schwarzenegger, would require that insurers commit 85 percent of their premium dollars to pay directly for health services, said Ross.

“It would also require insurers to guarantee coverage at a reasonable price to individuals regardless of their family status or their health status,” she said. “And those are the types of changes that are needed to make progress towards making health coverage more affordable."

With a number of other proposals already in the works, it’s not clear how far the Bush plan will get with Democrats in Congress. Rep. Pete Stark of California, chairman of a key health subcommittee in the House, has said he won’t even consider holding hearings on the Bush plan.

"Under the guise of tax breaks, the president is pursuing a policy designed to destroy the employer-based health care system through which 160 million people receive coverage," said Stark in a release on his Web site.

Bush also called for comprehensive immigration reform, including a guest worker program. And he asked Congress to renew funding for his No Child Left Behind education program.

Though analysts say Congress will likely enact — and the president will likely sign — some new measures on energy policy, progress on health care is more problematic, as is any progress on the even thornier issue of Social Security.

Congress may move forward with legislation, but Democrats won’t have the votes to override a White House vote without winning over some Republican votes. And some Democrats may decide to hold back on solutions, hoping to win the White House in 2008.

“With (Bush’s) approval ratings that low there is no incentive for Congress to go along with the president in any way,” said Brian Stine, an investment strategist at Allegiant Asset Management. “They're posturing for the next election. Therefore gridlock is likely to be story for the next couple of years. So what the president talks about — there is little likelihood those actions will be put into place."

But with the 2008 campaign already heating up, both parties will be paying close attention to public opinion polls, and that could help unlock the standoff between the White House and Congress.

“In the first six years Bush was pretty predictable — you sort of knew which way he was going,” said Valliere. “Now he’s got two years left and he has to be thinking about his legacy. And he’s got a lot of Republicans who are nervous — who want to compromise. So I think that the concern among conservatives or among pro-business interests is that he may become too conciliatory and that he may abandon some of his core beliefs and core principles.”